Alight, Inc. (ALIT) Earnings Call Transcript

Good afternoon, everyone. I'm Jeremy Cohen, Vice President of Investor Relations, and welcome to Alight's 2023 Investor Day. To those of you in the room and those joining online, we're thrilled that you're here with us, and our team is excited to showcase our platform transformation and our path forward. Before we begin, and I'm sure one of the reasons many of you are here today is to hear me do the safe harbor statement. Today, we'll be using forward-looking statements, which are not guarantees of future performance. Actual results may differ materially from those expressed or implied in these statements due to a variety of factors that are discussed in more detail in the company's filings with the SEC, including the company's most recent Form 10-K and update from time to time. We do not undertake any obligation to update forward-looking statements. There's a full disclaimer on the screen behind me. And at the beginning of the presentation that will be posted on our Investor Relations website, and I urge you to read in its entirety. Additionally, we'll be discussing non-GAAP metrics and reconciliations of historical non-GAAP metrics to their GAAP counterparts, and those are available in the appendix. In the room today are many Alight executives, and you'll hear from before taking the stage. Stephane Schall, CEO; Katie Rooney, CFO; Greg Goff, Chief analogy and Delivery Officer; and Alison Borland, Chief Well-being Officer. In addition, you'll get to see a live demo, and Alison will be leading a conversation with three of Alight's clients, including AutoZone, the NFL and Siemens Energy. Our leadership team is diverse in experience and background and that diversity permeates throughout Alight is a key cultural differentiator. It is our diverse group of more than 18,000 colleagues who enable us to drive our transformation forward, while making the lives better for our 36 million client participants independents. As you can see, we have a packed agenda today, as our leaders take you deep into our platform strategy, how well being comes to life through our solutions and our financial performance and outlook. We'll end the day with Q&A, and we'll have mic runners coming around for those in the room. And with that, I'm pleased to welcome to the stage, CEO, Stephan Scholl.

Good afternoon, everybody. Good to see everybody in a room together for the first time we have our customers, we have employees, we have analysts, we got our Board members in the room, and it's super exciting for all of you to be with us here today. And the buzz in the room during lunchtime was exciting. I'll tell you this is so much better than Zoom, isn't it? I'm super happy to have you all here to continue the conversation we've been having for the last 3 years, which is the mission of Alight around helping employees stay healthy and financially secure. We've been very consistent in the last 3 years around. That's our theme. That's our mission. That's our goal. And talking to all of you over the last few years and so many familiar faces, we've all talked about the agenda of the employee being real, that we really are in this moment in the era of the employee. And last week alone, another testament. Harvard Professor sent out an article that talked about how CEOs are still in a crisis of trust with their employees. And so we've been hard at work in the last 3 years of bringing together our platform strategy, which you're going to hear a lot today, leveraging over 40 years of our history of being the systems of record and content for millions of Americans and hundreds of millions of transactions and bringing that together into our employee experience platform. That's what you're going to hear for the next few hours a lot about. And we're going to show some product. You're going to hear a voice of client, and I can't tell you how excited I am that we're not doing this over Zoom, but we're doing it here together with all of you. And I'll tell you, this transformative journey will put Alight in a very exciting path to long-term shareholder value. So why do I believe that? You don't have to look very far -- next one. You don't have to look very far to see the continued theme of how employees continue to need help. Mental illness, anxiety, depression, making the wrong decisions on financial well-being are still real today as they were 3 years ago when the pandemic kind of highlighted the challenges employees are faced with. And so we continue to see this theme throughout the last few months alone, a lot of conversation around it. And I'll just tell you, personally, I think we all agree that, at the end of the day, we, as employees, we're all employees in major companies in some cases. And we're only as happy as our unhappiest child or unhappiest family member. And so just a few weeks ago, we launched Work Life to have access to participants, to the family members of our employees as well that we serve. And it's the first of its kind. We can't find anybody else at the platform level that allows the participants to allow their family to participate in the Work Life scenario because I do firmly believe we are all the unit as individuals across our family. I think what's maybe different and what's unique here today is that 2/3 of employees want their employer to play a bigger role in their success around staying healthy and financially secure. And I've met a lot of CEOs in the last 1.5 years to 2 years, and that's a very nervous conversation for CEOs of companies because they were always told you can't go there. It's too personal. It's too much important data. You can't touch that. That's the employees' own world, and you can't go there. And yet what we're seeing is employees are now asking for that, asking for employers to play a bigger role in helping them save better, make better decisions. And CEOs have to cross the line in stepping into that bigger role. So very interesting dynamic that we have in front of us. And when you think about the money that's being spent today, it's not that there's no lack of investment that's being made today. Employers are spending trillions of dollars to try and bring together a complex web of solutions for their clients and for their employees. And when you think about what it takes for them in terms of activities to do the most basic remedial tasks around staying healthy, that's what creates complexity for them. And so it's not only about the employers, it's also about the employees. When you think about 30 to 40 different systems needed to navigate through this world of making better decisions that's pretty complicated. If you think about the math, right, we're all here talking about shareholder value and what's in it for the clients and employers. There's over $25,000 of savings per employee if you do this right around productivity and higher health care spend. So that's our recipe here to really help drive more consistency and predictability. This represents hundreds of millions of dollars for Fortune 100 companies. And then here's the other interesting dynamic. We don't talk enough about the employees themselves. Employees get a pay cut in key moments that matter. And here's an example. And you'll hear a lot more about this. I'll just touch on the surface level. But think about a woman getting pregnant and starting a family. What has to happen for that new expected mother to go through in terms of most companies? They have to get a pediatrician. They have to no medical plan. They have to understand, do they have an HSA, if they have an HSA, what's applicable in terms of spend. If they don't have an HSA, you go to a 401(k), a 529 plan. You've got a register for leads management, childcare, what does the company cover? So you think all those pieces of ingredients, I just talked about 7 or 8 different systems. There's more there. So think about each one of those being completely separate and isolated in terms of engagement and in terms of data. Is that how companies should be treating their employees? And yet, this is still today, for the largest companies in the world, the complexity expectant mothers have to go through, still today. For the biggest, most important companies in the world, this is what they have to do. Does anybody know, because of that, where expecting mothers go? Where is the first place most of them go to, to find information? Anybody know? Take a guess? Nobody knows. Google. Thank you. Thank you from the front of the table. Perfect. Thank you. 1 billion health-related searches a day, 1 billion. We all know -- we all are pretty smart. We know how Google makes money. Is that the right place for somebody to go to have this kind of a conversation to find out where to go? I don't think so. So very inefficient. Out-of-network, tax inefficiencies, out-of-network complexity, that's what she's dealing with when in a moment that matters. So we've been hard at work tackling this opportunity. The last 3 years, you've heard me and Katie and the rest of us talk a lot about the platform opportunity. Taking the rich content that we built over the last 40 years, the systems of record and replicating them into one place, one front door for the employee, adding the content. And then the third layer is global service delivery. So when you think about platform, and you think about content that we get through systems of record, our own, plus we also, as you know, manage Workday and SAP. So we have the richest complement of data around the employee. And then the third piece is service delivery. You take those three pieces, that is our Business Process as a Service Offering, BPaaS, that term, you've heard me say a lot. That's what constitutes the entire complexity and the offering and ability to bring all this together. But it starts with -- you need all 3 pieces. It starts with the front door, knowing who that person is, knowing her background, does she lived in a rural area as a family, no kids, multiple kids, young, is you're going to retire in 5 years? All those pieces need to be part of the intelligence of having the platform. And so that's where our focus has been a lot in the last few years. And you'll see Greg and Allison really bring it to light through our products and our demonstrations what platform means. But I really want to emphasize, you can't do platform. You can't be a dynamic actionable platform meaning actionable -- when you make decisions in there that actually impacts the systems of record because you need the systems of record. And this is what sets us apart and kind of makes us unique in the industry because you're either a system of record or you're a platform or you're delivery organization. we have all three components as part of our BPaaS offering that makes us unique and somewhat complex to understand. That's where you're going to see a lot today around this topic. But this is what we're excited about. And then we've wrapped these moments that matter. So that one example I just articulated into a whole bunch of packaged services. So obviously, through hire to retire, there's a tremendous amount of moments that matter that we've worked hard on to build these packaged services to drive better outcomes, and you're going to hear more about these today. But the intent, again, is to really drive an integrated end-to-end experience across those three components to drive a better outcome for employees and their employers. You're going to hear AutoZone today who's in the room. You're going to hear it from the NFL. You're going to hear from Siemens Energy. You heard me on the earnings call, talk about GE, one of the landmark deals we did in Q4 of last year that is really relying on us to take all those three components of what I just talked about to have a GE employee log in through one platform door so that we know who that person is. If you do this right, take that example I just articulated early. So now she logs into Work Life. We know who she is. We know whether she has an HSA or a 401(k) or both. We know her economic capability. We know what's in network. I mean, it is amazing to see through our centers of delivery, how many millions of phone calls we get all every year around people calling us and saying, I didn't I was out of network. I didn't know I was being tax inefficient. I didn't know the decision I was making was going to impact my pocketbook. Employers are standing up screaming and saying, "I didn't know how do we drive better engagement? How can my employees are only using 5% of this component and that component and this component because it's not aggregated into a decision framework that allows us when that person logs in, we know already a lot about that person so that we can navigate that individual through all the different pieces of setting up a 529 plan, getting all the claims data that's needed through the insurance company all in one place. This is the experience you'll hear more about today, and that's the advantage of all those components coming together into one experience. You need size and scale to do this, right? We took on this aggressive task 3 years ago, this is why I joined Alight. What I found here was an incredible company with the strongest relationships in the biggest companies in the world. It had the trust and confidence of the most important clients, millions of employees already on the footprint, relying on Alight for moments that matter. It was now just taking that and building out that capability of a well-rounded employee engagement experience. $1.1 trillion would put us into top 20 GDP of assets under management when you think about it. That's pretty sizable scale that we have in terms of visibility. And we all here are talking a lot about analytics and data. Greg will talk a lot about it. You will see the troves of data that we have on behalf of our clients is the most important data set in the landscape of employees in terms of hire to retire. And when you think of the cost base being 70% for most companies spend their money on labor and people, I think it's pretty important to know exactly how we can help them do better with these kind of expenses and moments that matter. And this has been a journey we've been on for some time. We're well on our way. You'll see today proof points and validation. And of course, everything I just said, it takes a long time to get there. So we're still early in our journey, but we've done a lot in a few years. When you think one of the moments that matter for us was last May when we launched, finally after years of development work, our Work Life platform. And that took all our client base from custom to standard. That's the foundation that we've built now with our clients. Everybody, our largest clients are all on -- or 99.9%, right, Greg? Are all on the Work Life platform as a foundation. Now when you think of those packaged services and those offerings, it allows us to go in and talk about moments that matter and how do we implement and drive a different program for our clients. #2 moment that mattered last year, I have to keep on articulating it, is we launched and deployed the largest campaign of human capital management in the history of the United States with the federal government. 6.6 million participants. If I would have asked any of you in the room, who has the size and scale and capability to implement the largest client in the world? You probably wouldn't have said Alight at the point in time. Live, up and running successful and a great program for this company. So the fact that we now have moved from custom and to standard, we have scale and delivery and capability to implement a lot of these clients. I'm super excited about the journey we're on. And I've been here before. This is probably my third chapter in my career. People discounted back when I was doing the cloud transformation journey back in '13, '14, '15. Nobody thought companies like Ferrari, who I build the whole infrastructure for the move to the cloud, was going to do that. Taking supply chain, taking complex systems, factory floor processes and moving them to the cloud. People don't think that we're going to do that. Best-of-breed to enterprise 20 years ago being part of that journey. Nobody believed enterprise would win, and we know who did, right? Enterprise won with SAP and Oracle taking a dominant position. So being part of those two chapters gives me the confidence and excitement and energy that the journey we're here in around employees is one of the biggest opportunities in the market for us all. It's like a window into the last 20 years. When you think of 30, 40 systems, as I said many times, if you treat your employees like your clients, it'd be a different day. If you treat your customers like you treat your employees, you'd be out of business. You can't do this to your customers. So why do this to your employees. That's what we're bringing to the table is an opportunity to drive a tremendous amount of transformation in our installed base. Our installed base are the crown jewels of Alight. We see 2x AR uplift opportunity in taking those systems of record and transaction engines and driving them to a new outcomes-based platform approach. 2x ARR in our installed base. And our pipelines are the strongest we've ever seen in that regard. And when you think of the moment that we're in right now around everybody looking to consolidate and cut cost and getting ready for this potential recession that may happen at some point, they're all looking at ways to cut costs. That's where we come in and say, why do you have 30, 40 systems? Why do you spend all this money, 1% engagement rate, 5% engagement rate. We stitch all that together. And here's the interesting thing about getting to that 2x ARR in our installed base. We actually don't have to ask for a lot of extra money because we come in and look at their spend at what they do and show them the wasted spend already in place. So we're just reallocating funds more towards us to help drive a better experience. And then we also highlight to the employers, the plight of the employee, right? We can't have employees have pay cuts. They deserve better. They need to be able to have these moments that matter that build trust and loyalty to the clients. And if you get that loyalty with clients, what happens? Less attrition, happier, more productive employees, sounds pretty simple. Net new, first 30 days of arrival at Alight, I built out and pulled out the net new sales team, built a whole new structure, hired from the best software companies in the world. And you can see already the success we have in a huge addressable market, a TAM of over $73 billion, 700 new logos alone since '21 that we've added. And you've heard me highlight some of the big wins, but the dozen or so, or 20-plus names I've highlighted pale in comparison to the total of 700. And then just in terms of partnership. When you think about who we are at scale and size, we've been largely on our own to get here, which was also a marvel to me. Because we all in this room know the recipe to success of a great technology company is a big ecosystem of the Accentures and the Deloittes and so on. Well, we built that out. Thrift, Accenture partnership. You've seen our Workday partnership, where we are -- it's the first of its kind at Workday. They've never done a product partnership like this before. We are their go-to-market product for global payroll in European countries. That gives us a significant advantage. Now why did Aneel and Karl believe in that strategy? Because they see the same thing that I do, which is people are moving away from best-of-breed 30, 40 operational systems in HR and looking to consolidate and simplify under more one experience. And these systems of record that they have and that we have together are a competitive advantage over everybody else in the market. So another validation point that what we're doing is super exciting. So we're just early in the days of net new and also in our partnerships with great organizations like Accenture and Workday. So that's a quick summary of a lot of things that are going on at Alight. And over the next little while, you're going to hear a lot from Greg and Alison and Katie and Matt who are really going to demonstrate all the products. I thought what would be great is for me to exit the stage is for you to hear from some of the participants themselves about how we are already impacting people's lives in moments that matter. Thank you. [Presentation]

Good afternoon. It's always impactful to see the work that we do every day and how it affects real people and real lives. So I'm Greg Goff. I have responsibility for technology, product and delivery, large part of the services that we provide. And I want to talk to you today a lot about the journey that we've been on the journey that's ahead of us and where we're apt in that transformation. We've been very hard at work over the last few years and over the last decade, bringing that all together. So I want to first start with talking a little bit about market dynamics in the space. So Stephan talked a lot about fragmentation and fracturing of the ecosystem. I wanted to frame that a little bit for you in how we think about that. as we then talk about our technology and products. You can think of this sort of broad ecosystem playing with a few big parties, categories or parties that work together. Ecosystem suppliers. Historically, these have been things like plan providers, carriers, insurance brokers, et cetera. The employers themselves in the United States, often the provider of benefits, Globally, they serve different roles within that ecosystem and then the employees themselves and really the family unit. We think of that kind of broad extended family unit as the recipient of the work that we do and the employers do. On the ecosystem supplier side, we've seen tremendous fracturing on this. Historically, as most benefits looking backwards been handfuls of different benefits, medical, dental, vision, a few other types of insurance products, but with all the money that's left on the table that Stephan mentioned, just even looking through the family planning start, it's common for Fortune 500 companies to have upwards of 50, 60, 70 different programs and providers of that. And they exist because the money that's left on the table demands specialty and the way that, that works from an MSK provider all the way through child or elder care, et cetera. As a result of that happening, the suppliers don't have utilization. People don't know about these programs. They don't get taken advantage of. On the employer side, the employees are paying money for all of these programs for very low utilization. And then from an employee perspective, that creates confusion. What should I do? How do I make the best decision? I'm in a moment right now where I actually need to orchestrate as you heard on the fund, dozens of different phone numbers and different providers of what to do. Alight is the fabric that connects the ecosystem. That's what our platform does. When you have an ecosystem that works like this, it demands the need for a platform type approach to really broker interactions between those. And by virtue of doing that, we can also help inform the -- all three parties to make optimal decisions along the way, how to provide the best outcome at the point in time needed for that employee or their family, but also the best ROI to the employers who are spending a lot of money and not getting a whole lot for it. And we do this through our platforms that are a combination of the experience, intelligence that sit behind that experience, the transaction systems and the care model that we believe is also critically important. Technology alone is not enough to solve this problem. So let's look at a little bit more about how we solve this. I want to start with the foundation as a business. Stephan mentioned this. We've been in this business for 40-plus years, on this foundation of administration and services. This is important because it provides the opportunity for us to get into these higher-value services. How does that work? We engage with over 36 million participants a year. Participants being a user and employee and by extension many more of their family. We process hundreds of millions of transactions for them. Everything from what benefit do you have to payroll transactions, to loans against your 401(k) and the record keeping of 401(k). In order to do that, we are hardwired into the systems at every one of our clients and these providers, the HR systems, payroll systems, the financial systems, all these systems are to broker these transactions. That's critically important. It's very sticky. And with the duration of our business, these connections persist over many years and provide this big web of an ecosystem for us. The other byproduct of that is we have huge longitudinal data sets of all of these types of data, HR data, health and benefit data, wealth, financial data, payroll data. That ecosystem provides us an opportunity to then do the top two layers, which is a capability we've added. How do we drive engagement? And how do we engage in a better way by offering new solutions? And I'll talk about those in a minute. And then, finally, bringing that together through an experienced platform. You'll see a demo and Alison will talk about it in more detail. This is really what brings together that entire experience, the intelligence behind the transactions, behind the optimal decision-making into a singular view that says, right now, for you, this is the best thing that you can do. And that's how we think about sort of the stack together. Now as we look at this transformation, it's also required that we change the way we work as Alight. And we've been on a -- we have a solid foundation of a Stephen referenced it a little bit earlier. Over the last few years, we have upgraded every client in our book to a common experience that's not released and upgraded on a consistent basis. The SaaS software model for that. As part of doing that, we've retired a lot of customizations out of that technology, and it's created the ability for us to launch more standardized packages and products on a constant rhythm in basis. Katie will talk about that when we talk about growth. But part of getting there is getting the wiring of the organization more like a product type business like a software-type business. Going forward, that allows us to really structure innovation, standard releases, new products and packages and get predictability in product currency. We've been in this rhythm now for over a year, and we continue -- we will continue to add to this as we go, but we have a really solid foundation to start on. So let me talk about those four elements a little bit deeper, the four elements of our technology. On the platform side, our design thesis here is pretty simple. We want to provide a world-class user experience that surfaces intelligence directly at the moment when you need it. And so we've been investing heavily in AI. I'll talk about that more in just a minute. But also, as Stephan referenced, there's part of building a platform is building an ecosystem. So things like APIs and integration centers we've launched over the last year in value-based analytics. How does an employer know that the dollars that they're spending is the right dollar to service their employee base the best? We'll continue to build on these. And really, this matters because a differentiated employee experience matters, and it really matters because we can increase engagement. In this space, engagement is everything. If you can drive engagement every -- that's every opportunity is a time to influence a decision help drive a better outcome. So let me talk about our AI a little bit, and I get a lot of questions about AI and the use of AI and our technology, an opportunity for us. I want to highlight a few things, recommendation and personalization. We like to talk about this recommendation engine of one, this very personal, like what is best for Greg right now that may be different than what is best for Katie. This is about the recommendations and personalization about optimizing the decision, but the decision doesn't matter if I don't get someone to take action. And so these two things work together, right? How do I come up with the optimal decision across this complex web of offerings and then deliver it to you in a way that's specific, that's through the channel that's most likely to influence you, that's at the moment where you're most likely to take action. There's lots of other uses, and we see examples of this for clients where we launched this with last year. We see huge engagement. Engagement in our recommendations at over 50% when we offer those. That's a crazy high engagement rate for this, again, across a captive audience of 36-plus million participants and their families. And we see the number of engagements go up, where we have this turned on for the dozens of clients we haven't enabled. We see our engagement, our interaction for year '22. That's up from about [ 12 ] without this. Again, engagement matters in this space. It also drives value through the ecosystem, the more we can get partners to engage. There are a lot of other areas I'll touch on in a minute around assistance and natural language processing to help ourselves but also provide better experience to our users. Automation is a huge area for us, which I'll touch on in just a minute. and all of this is predicated upon a data foundation. Again, we have huge data sets over decades through our transaction systems that are what fuel this. AI models are only as good as the way you train them and how you inform them on what the best decisions are. And we think we have unique advantage in this by virtue of having those underlying administration systems, which create that data on an ongoing basis. People have to come to us to do that, and that's what creates that. It's that combination of the platform, the administration systems and the engagement layers that create the unique BPaaS offerings for us. But it's not just AI, we also had to evolve our tooling and our architecture. Over the last couple of years, we've been moving our systems to cloud, and we're now moving the back-end systems to that, common data platforms, again, to fuel our AI. Tooling matters when you're building an ecosystem as part of the platform, you've got to have great tooling. So we've launched tooling. We've launched developer tooling, self-service tooling. This benefits us, but also lets us create an ecosystem around our platform. So that becomes a critical piece for faster innovation, but also for creating distribution. We're going to be a distribution platform in the space, which we are. we are today the largest distribution platform in the space, we'll capitalize on that and get even better at it. Engagement. This is all about how do we create solutions that drive engagement, value and ROI. So a few recent things that we've launched that are GA not this place, Alight Well, that's all about bringing well-being content into our platform. Everything from challenges, biometrics, incentive models to help people target being healthier. For early clients that we've done this with, we've seen over 500% engagement increases. Again, that's traffic coming to us, creating a better outcome for that person that's well being oriented that also then gives us data that we can turn back into insights to make it even better. We launched Alight Marketplace. This is the -- where consumer products and offering flexibility to employees through their employers to spend money in the way they feel as best, right, for their personal situation. And we've talked some about program optimization and Stephan mentioned spouse access. This is critical from our perspective as we think often the employee is not the decision maker in this space. And so we have to optimize across that. Administration, I touched on these. We view these as really, really critical. These are our proprietary transaction engines across health, wealth, payroll and leaves their systems of record that create engagement in their own right. We've been investing in these. As Stephane mentioned, the Workday partnership and are extending our payroll engines globally. Same thing with modernizing and changing our administration engines to make them Alight Work Life ready, basically feeding the data up into the platform levels to fuel better insights. This matters really because this is often the point where the decision is made. I'm going to change a selection or a change of benefit or change a contribution level. They are recorded here driven by insights that we provide to them through that experience. And then, finally, services. If we've learned anything, I think, over the years of technology, different platforms, especially in the health care space, technology alone does not solve this problem. Just listen to the participants that you saw there, the employees of recipients. Sometimes, a touch is needed, a little moment. just a vulnerable time where I just got diagnosed with something, and I want someone to talk to whose objective, who's looking out for me. So we look at care really in two big areas -- sorry, services really and two big areas. Care, this is everything from basic. I don't know if this is covered or what my deductible is or all the way through certified financial planners, certified nurses, clinicians, et cetera, to help people through those decisions. It's a broad spectrum. The other piece of professional services we look at is, how do we optimize -- implement and optimize the software that we use, whether that's our software or whether that's Workday, Oracle, SAP, et cetera. That's a critical piece as well because what we find a lot of clients that don't know how to use what they have and so we help them through that whether they're our tools or just connecting into our ecosystems. So with that, I've talked a lot about what we do. I want to turn it to my friend, Matt, and he's going to demo some of this so you can get a sense firsthand of how this shows up for users.

Thank you, Greg. So yes, there's nowhere else on the planet. I'd rather be than showing off all of the really cool things that Greg has created over the last 3 years. And ultimately, really highlight some of the things that I would say we sent -- synthesized from as far as trends from both Greg and Stephan. And that's -- if you want to have a platform, it has to be integrated and it has to be intuitive. It has to service better data to make better decisions and create better insights and then ultimately, it has to be personalized. So to set the stage and move past the 1,000 words section that I'm sure you're all thinking and move to the picture's worth section, I think we have to talk about a little bit what Stephan highlighted as where platforms have come. Link Farms is where all of us grew up or many of us grew up that are of the -- a little bit longer in the tooth. And where a platform has to get to, to have value as it has to be able to provide information directly either from HR departments or the platform itself through personalizations. It has to really highlight that engagement layer that Greg talked about through things like well-being challenges, and at the same time, put and create value without having to click anywhere from all of our systems of record. On top of that, we have to create that same value for systems of record that are not ours. And we have to provide instant value, where am I at against my benefit plan, versus future value where am I at against my retirement plan? And if you really want to make them sticky, as Greg said, you have to wrap them inside a digital assistant that's always there and is always looking to help at any point. So we have a challenge. I think all of us know that, that e-commerce has changed completely the relationship that employees have with their employers, specifically from a digital perspective. And it's no longer good enough for it all to be there like we've seen historically. It all has to be connected. And that's really, as Greg talked about, the fabric. That's the secret sauce that Alight Work Life does because we get to push through a lot of those silos and we get to either replace or integrate with a lot of those systems that are part of that employee journey. And it also allows us to go beyond kind of traditional employee relationships and instead move into, I would say, a little bit more personalized. So I'm going to walk you through this. This is an everyday opportunity of an employee that's starting with a new organization. And as you watch moving through this very personalized onboarding, that's no longer a stack of paper, it's all about decreasing a lot of that stress and starting to build a little bit of that momentum into that first day what you walked and you didn't even know where the bathroom was, right, if you're an in-person. On top of that, we start supporting those first decisions. Choosing your benefits may be the first actual decision that a new employee has to make. And after 40 years, as Stephan talked about, we absolutely have a right to help you as a new employee make that decision. But we don't just suggest it, we actually tell you why. Based on all of that data, Greg highlighted, we can tell you why we think your out-of-pocket costs will be cheaper one plan versus another. We can ask questions like what providers, what specialists are important specifically to you and your family to ensure that they're in network? We can give you a lot more value out of that decision than simply trying to say, "Well, my cousin says, choose Platinum. So that's the one I'm going to choose," which is something we're going and trying to support every day. When you look at then how we can help you with your second main decision, which is usually tied to 401(k) and how much you want to put in that, we can highlight key things not only for the present, how much of my company matched do I want to take advantage of, but also we can build in strategies for the future that helped kind of that longitudinal plan. Do we want to put in escalation into that to be able to provide a lot of value? But then it gets to the personalized side. And we do this and one HR -- CHR away talked to, you do it in a very non-creepy way, and we like that. So we try to do this in a very noninvasive way where we simply ask simple questions like, what's of interest to you? What's important to you? And through getting those responses, which, at this point, we're trying to create these value circles of asking questions and providing value, we can navigate the 30 to 40 to 70 to 80 programs that Stephan and Greg talked about, and service to you only those programs and journeys that actually have value. So you're not navigating through a maternity journey if you're sitting here worried about stress and sleeping. We remove a lot of that from you. So let's go to another example. That was kind of an everyday example. Here's a moment of opportunity. We get a pay raise. Now we could go all Nashville, Tennessee, my own hometown and like I'm going to buy me a boat with all of this new money. But instead, at Alight, we're trying to support you in a little bit of a more longitudinal way about how you should spend that money because your HSA provider is going to say, give me more, max that out, or your 401(k) provider is going to say, give me more, max that out. But ultimately, you guys got on pay raise. And so we have to start to, again, ask some of those very clever personal questions that nowhere in the system is it going to be captured, things like do you have an emergency fund? Or are you planning for a kid's college? And we can take those very clever questions and actually start to build out a smart budget for you. In this case, it was $408, recognizing that some of that money you're going to want to celebrate your new pay raise and keep for yourself, but some of it, we have to build into a strategy for the future because there is a very good likelihood for many new employees especially that they're leaving money on the table that's not being harvested, either through 401(k) match opportunities or through pretax dollars to an HSA account. And the cool thing is, Stephan talked about is, because it's an aggregated and integrated system, it's a single click to then make all of that happen. It's not you then transferring that -- this new phone discovery across all of them. So I think that's an interesting way of how we're taking those BPaaS solutions and putting them together as a group of products and really driving a lot of value. But I, think what you heard from Tina and Greg and Sara in that opening video, was really at the heart of the more high touch side, as Greg talked about. And the line that gets me every time is, where do you go when you want to give up? It's a powerful question. Employees are asking that all the time. And I think what's interesting is all of them arrived at Work Life is where they go. So I think ultimately, the question is, how do we do that? That's what I would be asking if I was sitting in your seat. And if I think about it, let's talk through a common example. You are on vacation at Disney World with your wife and kids, and you wake up and your child has a fever. What do you do? You don't know the area, you don't know the caregivers, what do you do? Well, you can ask our digital assistant, Lisa, who's right there. And that assistant can check all of the boxes for you. Who's taking customers check, we can catch that. Are they any good, check? What's it going to cost you out of pocket, check? Where are they located, check? And ultimately, I want to click and get one click guidance to wherever that caregiver in a new city is, check, we can do that too. So from a high-tech perspective, we've got you. But Tina and Greg and Terra didn't talk about the high tech. They spend a lot more time talking about the high touch. So how do we do that? Well, we both have clinicians and navigators available to all of the employees that are operating inside this set of products on the platform that can answer all of those key questions for you. How do I manage this bill? I don't understand it. Can you help me with an appointment? Can you navigate 30 different referrals that I got? Can you give me more value? Do you got me? Are you going to be there when I don't know where to go when I want to give up? And the answer is, with Alight Work Life, the answer is always yes, we've got you. So ultimately, we've talked about a lot of how we're impacting employees, but Greg spent a lot of time also talking about how we can actually make a difference to employers, saving them dollars, identifying wastage, identifying utilization gaps and trying to understand how we can really create a much better picture for them because you cannot do this as an employer across 40 to 70 systems, as Greg talked about, because they all have different definitions. And so at Alight, we cannot only look at who is interacting with the system as an aggregate, not only by what percentage are coming through digital, but also what age, what demographic are those folks? We can also look at what they're interacting with at an aggregated level, which programs, Alight programs or some of those 30 or 40 that are required to have a better experience for the employee? And then, ultimately, we can start talking about what are some of the outcomes that you're getting. And this helps in not only from an employee perspective, what's your overall employee sat of your overall experience that you're creating? What are some of the key KPIs that we have for those employees around health and wealth indexes, but also, from an employer perspective, how much money are you saving because of this aggregated view? And ultimately, how much money is Alight Work Life saving you? Because, as Greg said so perfectly, we can identify the value of a particular program. In this scenario, it's a third-party program. It's not even one of ours. But because of our closed-loop reporting, we can do that. But because of that optimization layer where Greg and his team are constantly trying to get the right program to the right person at the right time, we can start talking about how we're optimizing and Alight is generating specifically more value to that organization. And we can also talk about it and slice and dice that by a lot of key D&I measures that likely you're not getting from each of those individual programs and certainly not in a standardized way. But ultimately, it's in capturing the value of all of that data that gives us our biggest advantage. Because if I'm in a conversation with the CHRO and I say, congratulations, your overall utilization is 104%. You're doing awesome. And she says, "How do I know? What does 104% mean to me. " means nothing. And the power of having all of that data and all of it aggregated across our book of business is we can say, no. Based on your industry, we'd see only 70% is the normal benchmark for that data. So you're doing really well. And we can look at it over time just as easily to be able to interact at very specific moments where we start to see more proactively when things aren't going the direction that somebody would want them. So ultimately, if you remember nothing else from the picture versus the thousand words, I hope that the vibe you got is from this 10 minutes across a vast product set is that it is very integrated and intuitive. It does surface a lot of really great data that absolutely helps employees make better decisions and employers have better insights. And above all, beyond all of that, it is hyper personalized, both from an employee perspective as well as from an organizational perspective. With that, I invite Greg back up to talk about the actual impact that technology has on all the other things we're working on.

Thanks, Matt. So I wanted to -- we've talked a lot about platforms and technologies and how that impacts our clients externally in the ecosystem. I want to turn a little bit and talk about the impact to us at Alight as a business. How we position for margin? How are we positioned for cost, and what we're doing and the impacts, what I talked about earlier has on that? You can think of our cost base, at least the high majority of our cost base really into three broad categories that I'm going to address. Our technology spend, the services and delivery spend and care. So I'm going to walk each of those a little bit and sort of shed a little bit of light on what the drivers of those are and how we're affecting those. So let me talk about technology first. It's a big driver of spend. And the real -- the big drivers here of costs are a few things. Our infrastructure spend, the customizations and the uniqueness of individual clients over time and really just the complexity of our system. On the infrastructure side, to give you an example, our business is quite seasonal in the way that we work. On the benefit side, it tends to be fourth quarter driven. On the payroll and wealth side, it tends to be first quarter driven given year-end processing, et cetera. So we see, during those peaks, for example, during enrollment seasons, we need 6 to 8, sometimes even higher depending on the year of infrastructure to be able to process all those transactions, all those engagements. Today, we have to keep that on the floor ready. We've now migrated that to cloud. It's a great elastic use case for us to be able to scale just up and down to accommodate those bursts. So we see that being a big advantage for us on the cost side, in addition to being able to take advantage of all the great capabilities those providers have to affect the product side. I mentioned about the customizations to configurations, again, getting into that environment of single code-based, multi-tenant type structure, SaaS type economics in that areas of our business are really important that we can sort of create that rhythm. And simplifying as part of the back-end restructuring that we're doing on now and going forward, we are taking out more than half of our applications. We have, again, simplifying our ecosystem. That will result, as you see as Katie will talk about margin expansion, et cetera, the ability for us to expand that over time. On the services side, there's really two big drivers here, as you can imagine. It's implementation and then the management of the services ongoing, whether that's administration of our technologies or that's administration of third-party technologies. On the Implementation and -- on the implementation side, this is a heavy automation space so we've been in the process of doing that to be able to take cost out of that equation. We see things, for example, 95% reduction in building new tenants for clients. The more that we transition to, common code, common configuration, inversion currency, the more it lets us automate this in a much simpler way, and we've seen that happening already. On the ongoing services piece, there's kind of an endless opportunity, I think, for us in terms of using AI and using RPA, all the different technologies used in the space. You see an example here, and we've talked in the past about status tracking and all that kind of stuff. A stat here, we process and look at more than 1 million documents a month, just in the segment of the business that requires often somebody to look at that. That's again a case where we can get better and better and better looking at kick out fewer and fewer exceptions. We have some technology in place to do this today, but that technology is maturing rapidly. And when I think about all the different types of AI and tooling available in the space, it's changing so rapidly. And again, I see this as a huge opportunity for us to influence. And then finally, on the care side, the big driver of care cost for us is really to it's the volume of calls and then the cost per call. That's a pretty simple math at the end of the day. That's how this works. On the call volume reduction side, the more that we enhance the product, the fewer calls we get. We've seen this already where we see reduction in calls. For example, when we launched, we had a release in February of this year, we made a lot of significant enhancements to our virtual assistance that I mentioned earlier and some of the technology that sits behind assisting people digitally. We saw a 26% reduction in channel jumpers. What that means is a person who started digitally and then called us, so they called us because they couldn't get the answer they were looking for digital -- they were looking for digitally even though they wanted to. And so again, that's opportunity for us as we mature the technology that sits within our product to take calls out. And so we see a big opportunity there. In addition to just call cost management, you'll hear this a little bit from one of our clients, just even process innovation and how to be topical around our calls. If you're calling about a tax form in February and March, we'll route you to tax specialists and get your answer faster, not routing you around. It's also more efficient for us. The good thing about almost all of these from a technology, services and care side is, they're good for us. But first and foremost, they're also better for the -- for our users, for the employees, for the participants service, for the employers. And so we see huge opportunity across our cost base to address these. So I wanted to hopefully get a sense of these, but there's a number of opportunities to do this. And with that, I want to bring up Alison Borland. She's going to talk you through a little bit more specifically how things show up for our clients.

Hello, everyone. I'm Alison Borland, and I am responsible for our point of view and our approach to supporting the well-being needs of our clients and their people. So I'd like to provide a bit more color commentary on how our platform approach enables this and why it's important? So to reground us in what we've talked about. We've talked about our legacy and benefits administration and working with the systems of record to generate a tremendous amount of data, tremendous amount of traffic, people coming to interact with us, and vision into the transactions that they want to provide. And that gives us the right, the luxury to then engage them through our engagement solutions, to provide more well-being content to assist with their financial health and improve their financial health, to provide them access to a marketplace, to provide solutions that they may need in the way that they believe their own well-being should be solved for. And then we layer all of that with the Alight Work Life platform, which provides the AI and the ability to personalize the experience so that we can deliver the outcomes that we've chosen to work with our clients to deliver. So we've talked a lot about these outcomes, and what does that really mean? What are the outcomes we're looking to provide? Primarily, we're looking to improve the well-being of our people, our clients' people, and we define that as living their best lives at home and at work. We do that across 4 pillars: a healthy mind, a healthy body, a healthy wallet and a healthy life. We look at the solutions and support within the pillars, but importantly, we also look at solutions across the pillars. You'll see that all these circles are connected. We learned before the pandemic, we learned during the pandemic, and we're still learning after the pandemic that life has lived across these pillars. Tuesday is not financial health day, and Wednesday, you're worried about your mind, and Thursday, you're worried about your body, right? You live across all of these every day, and that's important. And that feels good, right, to be able to support the well-being needs across the pillars. Our clients universally are saying, this is top of mind, this is important in the C-suite to improve well-being, and it feels like the right thing to do, and it is the right thing to do. However, it is also really important to the bottom line. Consistently research has shown that businesses perform better when strong well-being programs are in place. They're more likely to exceed financial targets and delight customers and innovate effectively and. retain workers and recruit talent and operate with lower health care costs. This is what solves for those big gaps in dollars that Stephan started the day talking about. This is how we make that difference and manage that impact. So this is sort of the so what around actually doing the right thing for your people. And our clients care about both, doing the right thing for their people and contributing to the bottom line. So then how do we do that? How do we really bring that to life? We saw some examples. And we've talked a lot about moments. We look at three categories of moments. First moments of acute need. We saw some of those in the participant videos. Hopefully, these don't happen very often, but when they do, they have a big impact on someone's life. And we have a large opportunity to make a positive difference in someone's life. It could be an eviction, a diagnosis, et cetera, it matters, and it's important. So the low frequency, high impact. Second moments of opportunity, new hire, someone going through retirement, a life change, getting married, starting a new job, opportunities when an individual is going through change and they're engaged, and we have an opportunity to step in and help them make decisions that are going to lead to better impact. So maybe medium prevalence, medium impact, they add up over time, right? And then finally, we have everyday moments. These are basic decisions you may make on any given Friday, right? Are you going to work out? How are you going to sleep. Are you going to think about your budget? Or are you going to prioritize your mental health? All of these work together. And so if you're taking advantage of your everyday moments, you might do a little bit better when you have a moment of opportunity. And if you're making good choices in your moments of opportunity, you may be better prepared when you hit a moment of acute need. So I want to bring this to life a little bit more through like a real-life example, and we're going to talk about Mary. Mary is an entirely normal human being. She's middle age. She has 2 kids. She just relocated for her job. When she was hired, she was defaulted into the 401(k). Her company had auto enrollment, great. So she has a decent 401(k) balance. She has never been less busy enough to think about emergency savings, and she doesn't know what HSA stands for. So when she goes through annual enrollment every year, she just signs up for whatever she had the year before because guess what, it worked. So she is totally normal. This doesn't sound broken, right? It sounds like kind of people that we know. So then think of a moment of acute need. She's at a soccer game with her kids and her son twists his knee. What does she do? We're going to talk about before, and we're going to talk about after. So before this is the traditional world. She has a 401(k) website. She has health benefits through her employer. What does she do? Well, she immediately picks up the phone, she Googles on her phone, and she goes to the nearest emergency room because she's in a panic. And why wouldn't you do that, right? So the income -- the outcomes of that, it's more expensive, not necessarily the best quality. Some of the services are not in network. She's left with follow-up around physical therapy that she knows her son needs and she kind of has to resort back to Google because she doesn't know what to do. Because of those high out-of-pocket costs, she has to borrow from her 401(k), so she's depleting her retirement savings, and she puts the rest on high interest rate credit cards, thus creating high interest rate debt, expensive debt. So the result of this is that her son has potentially suboptimal care. She's distracted from work. She's not focused. She is stressed about her son, and she damage her long-term financial success. So this is just one moment in one given day, and it's not destroying her life, but the question is like, could she do better? Is there a better way to work through that moment? So now let's consider what that moment would look like if she had Alight Work Life sort of upgraded and expanded with the engagement solutions, right? So what does he do? She still pulls out her phone, but she opens the Alight Work Life app and immediately finds a close by in-network urgent care with very high quality. It's at a significantly lower cost. She used the tool that Matt demoed, that helped her allocate her savings across 401(k), HSA and emergency savings. She's well balanced the amount out of pocket is much smaller, and she's able to cover it without touching her 401(k). Her long-term savings is preserved. The company actually saved some money when she used her HSA because of lower FICA taxes. So that's an added bonus. And when she goes to follow-up, she's prompted because her company has a subsidized musculoskeletal program that provides care for her son in a high-quality environment and for her a very low cost. So Mary is more focused at work, more productive. She feels better about her son's care. And we have instilled loyalty intercompany for delivering benefits to her at a moment of acute need. And it only happened because we took advantage of the moments of opportunity and the everyday moments along the way to prepare her for this need. For the organization, they've saved some money on health care claims costs. They've saved a little bit on FICA taxes and they have a worker who's showing up, an employee showing up, who's focused and productive as a result. And for Alight, we've expanded our relationship with the client to 2x ARR through comprehensive engagement services. So really, it's a big win-win-win for Mary, for her employer and for us as a business because we're able to provide this care for her. So that's an example of how this comes together, how those moments come together and have an impact for Mary. So then step back, right, Mary is one person. If you have 2,000, 10,000, 50,000 employees, you start to imagine the breadth of the impact that you can have on any given day through these everyday moments, moments of opportunity and moments of acute need. But also think about the other dimension, longitudinally over time. We have an opportunity when someone's being recruited. Their first day at work, as we saw when Matt showed how they would go through and choose their benefits. Every time they earn a promotion, they go to the doctor, they have a health condition, something happens in their family all the way up to when they're transitioning to retirement, and also through retirement. So you think about the impact, both across the population and across a lifetime, a career lifetime and retirement, and that's why clients are buying these solutions, and that's what they're hiring us to do for them, to deliver broadly over time and these accumulated moments add up to cost savings, higher productivity and other benefits that I will summarize right here. So you get the right solutions, the right engagement solutions delivered through the right platform to drive the right utilization and you improve employee well-being, health risk goes down, financial stress goes down, resiliency goes up. And for the company, they think about lower turnover, lower health care costs, better ability to attract and retain employees, higher productivity, support of their DE&I initiatives. So this is the return from delivering the solutions in this way. And while it's probably fun to hear that from us, it may be more impactful to actually hear from organizations who are hiring us to do some of this. So what we're going to do now is watch a short 2-minute video followed by a short break, and then we will come back and actually hear from three of our clients who are engaging with us in this way to hear their actual experiences and why they decided to do this. So with that, the video. [Presentation] [break]

Thank you for your attention. We're about to begin the client panel. So if you could take your seats that would be great.

All right, we are ready to get started. We talked bit about this, but at Alight, we have the privilege of serving some of the largest organizations in the country and around the world. And as we do that, one observation about them is they are incredibly diverse, many different industries, many different sizes. So what we're going to do today is talk with three representative clients across that book to learn more about they're using the light Worklife platform, their partnership with the light and what they expect to get from it. So I am very pleased to introduce three organizations. Here we go. We have Belinda Lerner, who is the Head of NFL Player Benefits and former Player programs obviously from the NFL. We have Doug Petty, who's Head of U.S. Benefits at Siemens Energy. Siemens Energy has been a client for about 2 years, but was also a long-standing client went a part of Siemens before that. So they've had an opportunity to sort of reimagine way they work with Alight. And I should have added the NFL has been a client for over 30 years. So that's our most tenured client. Thank you, Belinda. And then finally, we have Matt Harman from AutoZone. He's the Vice President of Benefits, Compensation and HR systems. And AutoZone is the newest client on the panel, having just started working with Alight in the past year. So three large recognizable brands with unique challenges and very different industries, very different employee populations, but all with one thing in common. their focus on employees and creating an integrated high-tech and high-touch experience for their people and for their families. So first of all, let me start by saying a huge thank you to all of you for joining us. This is a unique opportunity. I know, and we are grateful for your input. And so Matt, I would love to start with you. So given you were just in market, you had a lot of choices with something as important as your benefit programs for all of your people. Can you talk a little bit about why you chose Alight, why you picked us?

Yes, Allison, a lot goes into our calculus can only cover a couple of key reasons. Number one, the cost of benefits administration is only about 1% to 2% of total health care costs. If you pick the right provider, you can leverage that to save up to 10% or 15% of that total health care spend. And what that means to AutoZone and our employees is lower, more affordable and sustainable health care premiums and costs for both our people and the company. And I think if we would think about this day and age, there's never been a time in modern history where it's been harder to attract and retain talent than right now. So when you think about enactment of your culture, employee experience and service, it matters. Why? People have a choice, and when people have a choice, you have to differentiate yourselves. And so as we think about our employees, we think about them as our customers. When we think about our customers, we think about delivering service, we think about giving them what they need at the time that they need it. And as we thought about a customer thing that could really help our people, it's always only at the right time. So as we were thinking about who to choose in the marketplace, we needed somebody who could really deliver for us. When we think about our customers and our stores. We want to focus on them in a way that makes them feel like they're the only customer. If we look at what Alight offers, they're best positioned in the market right now to help with that multigenerational workforce that we have because it's a combination of high-tech and high touch. And that's what's really necessary to deliver today's workforce and population. As we think about selecting a partner and think about who's best positioned with the best hire to retire, meaning all the different systems you heard about, how do you have someone as an employee who might be hourly, they don't have time to navigate 16 different systems when they're trying to help a customer. So we needed to make sure that, that was done for them and make it easy for them to navigate. Finally, when you select a partner, and it really is a partnership. It's like marriage, if you don't select the right partner, you're not going to be very happy. One of the things that we needed to make sure we were doing with our partner is it's an extension of our team and our brand. We have an intent to grow and innovate to stay ahead of the competition. And in order to do both of those needed a company that could both scale and innovate with us, and that was Alight.

Thank you. So thank you for your trust in us. And there are so many themes in there that I think are so interesting around Stephan talked this morning about the money at stake and the money at risk and the fact that the administrators -- administration costs are so low compared to the potential ROI is really powerful as well as that experience and Stephane actually talked this morning about treating your employees like customers, why would you treat them worse than you treat your customers, right? And you just actually brought that up coincidentally as well. So thank you for that insight. So Doug, now at Siemens Energy, you've really chosen to use Alight Worklife as your digital front door. So like all things, right, go there for the things employees need to do their jobs as well as to care for their families. Can you share a little bit of color about how that's going, why you chose to do that? And then how is that impacting the way your people work and what they're getting from it?

Most of my employees are engineers. We want those engineers doing what we pay them to do. We don't want them having to look all over to get information about how to manage their health care. So by driving to a digital front door, we can drive the engineers and the rest of the employees as well, obviously. We can drive them towards one place to look for everything that they need. By -- Stephan talked during the earlier presentation about bringing all this data together to personalize it. When you work with a bunch of engineers, they live for data. So that -- giving them that data, right, in an actionable format that's tailored to them allows them to focus on what they do and not have to become sudden health care experts. So that's what it looks like for us at Front Door. And it's yielding results. Once we have people to use the front door, they use it again. We've extended the Front Door right up to the candidate process. So now we're catching people early pretty much the first day they're at work in enrolling in the Front Door and its attendance helping them to enroll for their benefits. So we're able to capture these people, engage them early and work them all the way through the process. That's what it's looking like for us.

Yes, I love that because we just talked about the longitude right? Starting from the very beginning and then extending it all the way to hire through retire. Now when you think about the return, are you saving any money? Are you seeing any results based on using the Front Door that way?

Yes, we are. I mean we are seeing -- we've seen a real uptick in our engagement, right? We're showing about a 70% engagement rate. In dollars and cents, we're showing about a $700 to $750 verified claims savings once people touch the system. So once they're through the front door and they're using it for the referral sources, we're seeing a real verified net benefit to us in claims -- in reduced claims cost. And through the partnership with our data warehouse, we're also starting to make sure that those claims costs don't come at the at the price of bad outcomes. So we're also -- we're starting to verify that the outcomes are also improving as well.

That's great. $7 to $7.50 per person touching the system adds up fast, right, with a large population that's fantastic congratulations. Okay. But, Linda, now you have an incredibly unique set of, I wouldn't call them employees, but players that you have to service. And Doug just talked a lot about high tech and leveraging a digital front door, but your population may need something a little different, maybe perhaps with a bit more of high touch, just given their needs. Can you talk a little bit about how we help you across Hitech and high touch and how that's received?

Sure. And even beyond that. So our benefits are all collectively bargained, which means I have several task masters I have to address. One is the ownership, the other's the NFL Players Association and then the players themselves, both active and former, and each of them have different priorities and needs. So we know, again, multi generationally, we have players who played in the 70s, and we have players on the field now. Some of them are very adapted using technology, others don't want to have anything to do with it. So we had to make sure that we had the underpinnings of strong technology, but that the high-touch piece had to be what the players were first interfacing with. Stephan had mentioned something about now employees are looking for more from their employers on the benefit side. Our guys always look to their employers for benefits, right? I mean they come in the door, getting health care, everything was taken care for them. That mindset doesn't change when they leave the game all that much, so they need to have that personalized touch. And I know what happens is when a player calls in, he's speaking to somebody at Alight live, who's going to be able to answer all these questions, understand the full breadth of benefits that he's entitled to and give him the respect and regard that he needs. And so I know that because that's my experience as well. So when I have a problem, as an employer in a particular area, I pick up that phone, speak to some of those same people, and I feel very confident that they'll be able to resolve whatever issue it might be. But again, it's what that front piece is the high touch. And that's what the players need. From my standpoint, administering these. I need to make sure that it's technologically so and that the owners make sure that it's actually effective and it is a good investment for them.

Yes. Fantastic. Thank you. Matt, I want to come back to some of the things you said. You have a large retail population, right? We all know right now in this environment that's very challenging and turnover can be a bit of a problem. You spoke also about partnering to innovate with Alight. Anything you can share around turnover and how you're thinking about that and innovating to help address it?

Sure. So turnover has a real cost to employers today. A couple of things we did is we actually offered, in partnership with Alight, day one benefits to our part timers and our full-timers and their waiting periods. Now what this does, it's pretax, so it provides a tax benefit to both the employee and the company while providing them affordable coverage. Now here's the great part, at no incremental cost because these were voluntary benefits. So we're able to offer great, affordable benefits to a population we couldn't before at no incremental cost. So as we were able to do that, that obviously is going to impact attraction and retention of employees. It also helps them move to that employee life cycle from hire to retire that we talked about. It's key to understanding the life cycle because turnover is about catching that individual in onboarding and helping them with all the right things so that they want to understand and stay. The other piece that we implemented with Alight is our guidance resources. So these are counselors and medical allies that help choose meaning select the right programs for the AutoZoner and their family and then use, meaning when they need health care, what's the most efficient way to get it? Not only does that increase satisfaction for the employee, not only does that take care of them in a way when moments that really matter that we've heard all day, but it also helps with outcomes over time, which not only saves money, but it increases retention and reduces turnover. So I'm here to tell you, in an hourly workforce, it's like $4,000 to $5,000 per hourly turn or more and more with wages on the rise as they are. If you're talking about a salaried individual, you're talking up to a year's salary that turnover can cost. So it is absolutely a clear business imperative for us at AutoZone.

Yes. Wow, that's powerful. I love the creativity of being able to deliver benefits added -- value added additional benefits at no cost and then really able to impact turnover, which has a very hard dollar ROI to the organization. Yes, nicely done. Okay. So Belinda, back to you, part of what we've talked about today, and over time, is our expansion of services. And as you know, we've acquired different solutions like retiree medical, leave management, different things in health care. How do you think about that as an opportunity as a client? And is that something you've taken advantage of?

Yes. I mean I can give a very specific example on that. I was at the negotiating table as we were contemplating how to expand benefits for our former players in the area of medical supplement in the mid sub area. And one of the ideas we had was expanding it, so there'd be an exchange, it had to be easy to use. And again, something that's going to have very accessible and easy calling system. So when we were negotiating this, we didn't know we thought at the time it was going to be Aon, who is going to be overseeing this, and it turns out the Aon later then spun it off and it became Alight, but that gave us great peace of mind because we had 30 years of history already with Alight, people who knew our population. So your acquisition actually allowed us to grow with you, and that's been something that we've done. I talked about my three task masters. One I did not mention, which is the media. I mean, we are very sensitive and always have to keep that in mind because our players can be very vocal when they're disappointed. And so we know we need to have the quality on all ends of the spectrum because otherwise, it can become a public relations nightmare. For this, when we moved into the mid sub area, again, we had the history with you. We knew we wanted to expand. You had the expertise. It was a perfect blend for us and it's worked out very well. So it was very exciting. And we get the feedback we get is from individual players is over the top. People are very respectful. They gave me my answers. And for that constituency, you'd say something so complementary is it's not easy. They're not an easy group to appease. We've been very, very satisfied with that extension. And we'll always keep our eye to see if there's opportunities to enhance the benefits and do it and grow with Alight.

Fantastic. I love that. And I think when we think about our platform in Alight Worklife, the ability to sort of add components into the experience that employees are already coming to anyway, it makes it very organic and natural to expand and grow. So thank you for that example, Belinda. One more question. I love to -- I think we have time, so you can each answer it. And while I know AutoZone is a new client, I will divulge Matt personally has longer experience with Alight, so he can answer this question, too. And similarly, Doug, when you add Siemens and of course, Balinda has been a client for a very long time. So we've talked a lot around transformation today, and we've talked about a lot of the investment that we've made and what we're building and how we're building it. Could you speak or think a bit about something or some things that you think have changed at Alight that you've seen over the past couple of years compared to maybe what you saw historically? And Doug, I think it's your turn, so I'll put you on the spot to start.

So I'll say that I did a lot of mergers and acquisitions. I was always on the receiving side of divestitures. So went live with an acquisition on April 1 of 2017. And a month later, Alight became Alight. So I'm kind of familiar with from the infancy. But I think the -- what we continue to see is the taking of that massive amount of data that you have and being able to move it into actionable items and then deliver that to our employees. That's really where I've seen the biggest growth. I mean everything else tends to be commentary in terms of product, but it's that continued meshing of all that data and then turning it around and turning it in again to an actionable item that an employee can work on. And what that means is when they contact the late, they don't have to tell their story again and again and again. The story is there, and the story continues to evolve. And when you call in at that point in the story is when you begin your action and what it is you want to do. So also the integration of that data.

I'm sure you're making Greg very proud with the investments in AI that we've made. So thank you for that feedback. Matt, do you mind answering the question?

I'm going to take Doug's engineers who want all the data and compare those to retail hourly workers who just want the data to help make the decision that's right in front of them. They don't need to know the why, they just need to know what they need to do. So that combination of the high touch, high tech is what they're looking for. The second piece with the counselors and the medical allies is really about helping them make those decisions that help them put money that they don't have to spend discretionarily pocket. That creates a ton of value. And it's like the old add-ins. You can give someone a fish and they have a meal, but if you teach them to fish, you feed them for a lifetime. That's kind of the whole concept around Alight platform, it's meeting people where they are in a way that helps them take something that's so complicated and so hard and make it easy. So simplicity has definitely changed. And then I would say what's changed outside of Alight that makes Alight tools even more relevant is people want a consumer-grade experience. want to be able to go and do something that's easy. Health care is not and has never been easy. So we have to go through a lot of trouble to make that happen. And that's where the platform, I think, really shines is whether it's high-intensity data through AI or it's very acute needs with someone who has a medical condition they need help with right now, or it's someone's claims that are going to cause them to not be able to pay rent that month is the way to solve the employees' problems and make them feel that they are very much taken care of by their company, and that's what lowers turnover, and that's super important to us.

Yes. Fantastic. I think we might have to borrow your fishing analogy really well. So thank you for that feedback. And then Belinda wrap it up with some thoughts from you.

Sure. I think the one word I think, is nimblesse, and that has really been important for us, unlike a lot of employers, we really deal with the life cycle of a football player because he's there from the time he's an active player, and we see them really through the entire life cycle, which is unusual for some employment relationships. As a result, we have to satisfy the needs of different generations and try to come up with innovative ways to be able to serve them. And it's been wonderful to deal with Alight because as between acquisitions and the expansion, you help us in our thought process. This is what we want to do in terms of designing a program. Can you support what our needs are? And I can say that Alight has been very active in helping us behind the scenes and trying that nimbleness. How can we move from here to there? How can you play that part? Do I have -- I don't want to have to go to another third party. I want to be able to work within the same systems. And I would say that would probably be the key takeaway for me in terms of what I see now that I haven't seen previously.

Wonderful. But I mean your examples in your stories around innovation, around expansion of the solution set around the digital front door, consolidation, the cost savings, the return on investment, the reducing turnover, the hard dollars resulting from that. Hopefully, all of these themes resonate and build on everything that we heard about this morning. I would like you to join me in offering a huge thank you to these clients for bringing this phase to life. And I think they are ready now to move on and I would love to introduce our CFO, Katie Rooney.

All right. So nice to see everyone in person. Thank you all for being here. Huge thanks, as I said to our clients. Hopefully, that really brought it home for you in terms of the impact we can have for our clients and for their people. I know everyone keeps asking, why didn't you put your guidance out first? We're going to get there? I promise. We're like minutes away. But I think, first, if you just take a step back for a second, I think it's really important that when you think about where we are as Alight, we can say we've delivered on the past 2 years. We came out at the start of 2021 in, obviously, a bold way in terms of what we thought the market opportunity was and how we were uniquely positioned to solve it. And hopefully, you heard that today. And we've delivered on it so far. We've delivered top line growth, bottom line growth and free cash flow growth while investing for the future. And I think that's really unique. You also hopefully have all heard what BPaaS is. Again, we don't talk about BPaaS with our clients, right? That is, again, the power, though, for you to understand why we are driving a different growth profile. And so that combination, you heard from Stephan, from Greg, from Allison, from our clients of having a platform approach with the system of record that provides the data to drive recommendations with the care model around it, that delivers a very different outcome for our clients and their people that drives more value. We had our Q1 earnings last week. I know a lot of you dialed in, thank you, and asked some great questions. As we said, we continued the momentum coming off of 2022, strong revenue growth, strong EBITDA growth, strong cash flow growth. But there was a question I heard from a number of you. What about BPaaS bookings? I said it was great validation. I love there was so much focus on that because you are seeing the transformation and the opportunity, but let me put it in context for you. Over the last 6 months, our BPaaS bookings are up 40%. In January of '21, when we came out, we said was our goal was to hit $1.5 billion of BPaaS bookings within 3 years. We did that 9 months early. I sit where I look today, it's an incredible team. They've driven a pipeline that's up 30% higher deal size. And that -- what that means is the strategy is working. Think about Q4 of last year. We signed two huge deals, GE and a Fortune 10 client. Think about Q1, we sold really important deals that don't have the same TCV component, right, total contract value, we look at BPaaS bookings in terms of total contract value. But you also have to sell ARR deals, right? That drives in your revenue. You need both, and we're doing that. When I sit here today, we have $3 billion of revenue under contract for 2023. Guess how much we have for '24, $2.4 billion. I have never, at this time of the year, not even halfway through the year, had $2.4 billion of revenue under contract into the next year. That's the power of those solutions we're driving and the revenue base they drive. And we can do it in a tough macro environment. You heard it from our clients, turnover is important. Talent retention is important. Cost savings are important. We can do that. We have a highly resilient solution and business model. We have high recurring revenue, over 85% of our revenue is recurring. Good visibility, as I said, this year and next year. We have a very strong balance sheet. We took advantage in the first quarter with some of the dislocation. We increased our hedge position on our debt. We're 84% hedged through 2025, '24, and we are 60% hedged through '25, and no maturities until 2025. And all of that leads to a strong free cash flow profile, which we're going to talk a lot about, but the visibility I sit here today with that recurring revenue base, enables me to make decisions today to make sure I drive free cash flow. We saw it through COVID, through the period, you can see there on the right in terms of that stability, and you're going to hear more about it from me in a minute. So how are we creating shareholder value? As you'd expect on the top, but that's driven by the bottom, the power of our platform approach, how we're investing in our go-to-market and how we're continuing to transform the way we deliver our solutions. If you think about how we price a contract today or our revenue model today, on average, we have 3- to 5-year contracts. Are there some that are longer? Of course. Are there some that are shorter? Of course. But on average, they're 3 to 5 years. It's one bundled fee. Think about how much we've talked a lot about the investments we're making in our technology, in our go-to market, think about the different value proposition to our clients. It's really hard to drive value for that when you have one bundled fee. Also think about the cash flow dynamics. What other industry do you know where implementation services platform is altogether. So I don't see a $1 of revenue or cash from a client until they go live. And these are really -- think about the power of what we've talked about from an integrated solution with a complex number of partner solutions, our solutions that we're bringing together, it can take 6 to 18 months to implement a client. Think about GE in the fourth quarter. I won't be fully live until 2025. I don't get $1 of cash until a deal goes live because it's one bundled fee. Now that's not the best model for us. But how do you change it? You can't just change your pricing model in the industry? You have to drive a different value proposition. You have to help the client want a different solution that they'll pay you for. If you've heard nothing else today, when you think about -- and we can talk about BPaaS all day long. Think about Allison's example with Mary. How many clients do you think want the solution on the left when you showed the from to and on the right, right? You'll pay for that. And so if you think about where our pricing model needs to go, start at the top, platform subscription fee. We're investing a lot in the platform, price goes up. It has to as you roll out no releases, everything Greg is doing, you're driving a different value proposition for that client. You then have the SKUs, the content modules in the middle. And importantly, everything we're doing around standardizing care and making those personal to a client, you need to get value for that. Does some of them want a high-touch service, you heard from some of our clients, others don't. We need to be able to segment that differently. What that means is faster revenue and faster cash flow and the ability to collect and drive value to our clients and to us in a different way. So we're already starting this. Listen, I get it. This won't be easy. We're not going to change the industry overnight, but we're already doing this, and it's going to have a real impact. So what does that mean in terms of growth? You heard Stephen talk about it, you heard Alison give the example about a 2x uplift. Why does that matter? If you think about the incredible client base we have today, there is a massive opportunity to upgrade them into the work-life packages you saw earlier. It's a 2x revenue uplift. Those are bigger deals. You've seen that in the pipeline today. We have new logos. We now -- a couple of years ago, we didn't have a new logo team. We have a dedicated new logo team. We have incredible value engineers that work with our clients, with our teams to think differently about bringing new logos in. Think about those we signed. It's pretty powerful, Navistar, GE, PwC, Fortune 10 clients, or [indiscernible]. But that has to be powered also by a different strategy around how we think about our partner network. I mean, [ Cesar ] here in the room. So he has really helped us with the Workday partnership. It's pretty incredible. If you take a step back and think about their validation of our strategy and best of breed to enterprise of that brand and going to market together, that's really powerful. We don't have to do this all on our own. Think about our partner network. 150 partners that we've curated, you saw when Matt went through the demo, we can make it easy for everyone. So this ecosystem, Stephan talked about the total addressable market, it's large, that's going to help us grow. So how? Here's the first money slide. Don't worry. I'm going to give you the full guidance. But I really think it's important. When you take a step back and you think about BPaaS and non-BPaaS, let me actually define what non-BPaaS is, right? Think of that as the nonrecurring one-time professional services deals, or the, again, kind of onetime stand-alone core administration deals. Think a little bit of Alison solution on the left, right, when she did her from-to. Now think about the incredible power you saw through the demo through Mary's story about what we can drive to deliver the BPaaS solutions that drive that personalized outcome for the employer and the employee. You can see why there's higher demand. We can do that in our existing installed base. We can do that through new logos. We'll see that in the new pricing models, and we'll see it in the product releases that we have to continue to roll out. But the non-BPaaS piece, listen, it's still really important, right? That's where a lot of the underlying data comes from, but it's a different growth profile when you think about it on a stand-alone basis. So a combination of both of those gets us to our medium-term revenue guidance of 6% to 8%. But look at the pies on the right. Today, BPaaS is about 18% of our revenue. As that continues to shift closer to 30% in the medium term, you'll see that growth algorithm start to shift as well. And we've already seen it. I think when you think about credibility in the marketplace and delivering on what we say, this is a slide actually we showed back in 2021. We've hit everything we said we were going to achieve in terms of the BPaaS revenue and bookings. And why is that also important? Everything you heard from Greg that also helps drive a different margin profile, 60% incremental gross margin flow-through. That's really powerful. I get asked, why did you move your segment structure or reporting from adjusted EBITDA to adjusted gross margin? Because you need to see this, right? It needs to come through. And you need to see it, and you're going to see it. And so what does that mean for margins? Employer Solutions, adjusted gross margin is going to go up 300 to 400 basis points. And our adjusted EBITDA margin is going to go up 400 to 500 basis points. That's not easy, but that's the opportunity when you think about the different value proposition and solution we can deliver for our customers and their people. Let me give you a little bit more specifics on that. Where we sit today from an adjusted EBITDA perspective, right? About 21%. We talked upfront about the Worklife pricing model in the product release, that's 50 to 100 basis points. You heard Greg talk about delivery, customer care and our technology infrastructure. Those are those next 2 buckets. You saw very clearly what those metrics are that will help drive a different experience that makes it better for our clients and their people and for us from a margin perspective. And then we'll continue to drive operating leverage on that list, and we know we've made investments. We've been very clear about that because we see this opportunity, and we need to get it right. But there will be operating leverage on top of that. So medium-term margin expansion opportunity, as I said, pre-adjusted EBITDA is 400 to 500 basis points. But what's really exciting is that think about that. When you think about those dollars of expansion, think about how that translates to cash flow. So I get it. It's been noisy, right? We had onetime items tied to our spec, tied to some acquisitions, tied to a lot of incredible work we've been doing. But we've said, even with all that, even with our investments, we're improving operating cash flow every single year, and you've seen it. We've done it over the last 3 years, our guidance this year, 45% to 55%. And we will already get to our long -- the low end of our long-term target next year, right, 55% to 65%. This is operating cash flow conversion. CapEx will come down after this year, closer to 4% of revenue. So that free cash flow conversion goes up as well. So if I think about the medium term, that's potentially $2 billion in additional operating free cash flow. That's pretty exciting. When you think about the opportunity we have, ahead and how we need to continue to invest in this business? So we've said we're going to be really transparent around we will continue to invest in the business, but we're going to do it in the right way. First priority is protecting the balance sheet. If you think about just operating leverage that we've talked about, by the end of the year, we'll be under 3.5x levered. So our goal, excluding M&A, is closer to 3x. With M&A, we're seeing us go up to 4x leverage. But we've put that foundation in place in terms of the strength of our balance sheet. But then we're going to reinvest. We're going to invest into this business. And we have the opportunity to do so in the right way in terms of the growth algorithm, in terms of what we're seeing from our clients to do that organically and inorganically. But that has to deliver a return. We're eyes wide open on that. But we also, given the cash flow dynamics, have the opportunity to also return capital. We have $78 million left on our share buyback program. We'll continue to look at that, along with, obviously, the first 2 priorities. So our medium-term guidance. I think about this to the -- getting us through 2026. BPaaS revenue growth, 15-plus percent. That equates to total revenue growth of 6% to 8%. And the flow-through on that, that equates to our adjusted gross margin impact of 300 to 400 basis points and adjusted EBITDA of 400 to 500 basis points of expansion, with a higher cash flow conversion while we're transforming. So let me wrap it up. I think it's pretty exciting. When you think about the business we have today, when you think about the incredible assets we've built over 40 years that are highly resilient in a macro environment, that have great recurring revenue, great cash flow characteristics, it's pretty exciting. But wait, that's the first piece. When you think about everything you've heard today, how we bring the power of technology with systems of record wrapped with that incredible care experience, we are in a category of 1. And we can deliver that uniquely to our clients and our people at scale, and we're already doing it. We're seeing that. You're seeing that come through. And I think that's really exciting. So I'm going to pause there, and we're going to open it up for Q&A. I'm going to have Stephan and Greg and Alison come back on to the stage. So we have some mic runners in the room, Jaycee and Matt.

Scott Schoenhaus from KeyBanc. Thank you for the demonstrations, testimonials and more stats, very appreciative. So I guess first is if we're heading into a more softer macroeconomic conditions, the focus will be on cost savings, right? And you outlined about 26,000 cost savings per year for each employee. And then on the maternity journey, I think you said 13,000 that would have saved the employee or the employer. When you're having these pricing discussions, is it easier to think of more mature clients, you'll be able to take pricing because you're delivering more results, there are more maturity and more data, driving more outcomes? And are these conversations where you can adjust prices annually, semiannually? You talked about launching products semiannually. So it seems like there's more flexibility in the time frame than people are aware of. I guess that's my first question.

Do you want me to start?

Sure.

I mean, it's a great point. That's exactly where you go to that different pricing model because when you think about clients we have with us today, right? We already have kind of the implementations done, that data integration done. We can continue to add on services more easily and get value for the platform, exactly as you said, semiannually. So I think that's really important. And when you think about the cost savings at the individual level, we can show that, right? We can track that. And so I think being able to measure that -- look at that dashboard, right, making it real for that employer is really important. That's been a key area of focus.

The thing I would get in -- if I just net it all out, this whole conversation, there's 1 real north star, and that is whoever owns that participant relationship that will be the kingmaker of opportunity. That's the #1. That's what the word of platform means. If I can convince, not only 36 million, but their families to look to Worklife as the first entry point for anything to do with well-being, the opportunities are limitless for us in terms of taking cost out, simplifying, consolidating. I mean we haven't even talked about different revenue sources that are in our future, if you start becoming a broker of record on commissions for insurance, if you start thinking about AFA financial advice, the list goes on. Clients are taking us there. And I had a client call just last week with a major health care company, huge attrition, losing 75% in the health care of their first year employees, losing 30% attrition to other people, and they look at this whole category of what we're doing as a #1 way to help drive down those cost issues that they have. And you heard today the numbers around that. And what's the #1 answer they look to us for is, how can I provide when somebody gets an offer letter, there's a QR code, it takes them to Worklife before they even start. I have them onboarding with us into a great experience right off the bat before they're even an employee. So that's how we're really thinking about this. Greg, I think -- we got to be careful what we say in a public environment, but he's working with some big financial services companies where most -- a lot of these companies use ServiceNow as kind of a front door for a lot of the general things. But ServiceNow is a static door front, it's not dynamic. It's not actionable, right? So now there's a lot of conversation, which I'll let you jump in there.

Yes. I mean I think, as I mentioned on the AI side, a lot of what we're doing in that, it's very purpose-built to this problem they're solving, taking money out of the equation. And we're unique in the ability to do that versus just an aggregator of different collections of benefits, et cetera. I would also say to your question, we see increasingly a lot of the solutions are less sensitive to when they have to be turned on or the longevity or the long implementation times, et cetera. That affords us more flexibility as well in how we price, how we roll out, getting everyone on to a common experience, now I can turn things on underneath that, whether that be marketplace that I mentioned or well-being content, et cetera, I can enable that now pretty quickly as part of that platform with everyone being on the same vein. So it gives us a lot of more flexibility than what we've had historically.

And by the way, just on that attrition example I gave you, the math that, that customer agreed to do, just a 5% reduction is $50 million. So when you get into a model discussion, it becomes almost mute. If you say, can we just impact that attrition of first year, and the ghosting, right, that was kind of the other -- I didn't say the word ghosting, but that's what they call it, 13% of people don't even show up. If you can solve for that, that's a 5% solve is $50 million for them in that category, 5%.

My follow-up is for Katie. How should we be thinking about midterm targets? Can you put that more into...

I said it. I said it. I said' '26 .

Okay. But is it a stair step -- I mean, how do we get to '26? Is it a stair-step function? Is there more gradual? Or is it back half weighted? How do you -- how should we think about that ultimate goal?

Yes, great question. A couple of things. I think first, we've talked about our restructuring program, right, which goes through next year. So you'll see more of that, right, once we're off the dual infrastructure, as we've talked about the run rate savings, you'll see incremental progress in '24, and then it continues to ramp. So each year, you're going to see progress across our 3 metrics. I mean, that's the goal. I think once we get through some of the -- that investment cycle at the start of '24, it will ramp faster.